Breakup Fee


DEFINITION of 'Breakup Fee'

A common fee used in takeover agreements if the seller backs out of a deal to sell to the purchaser. A breakup fee, or termination fee, is required to compensate the prospective purchaser for the time and resources used to facilitate the deal. Breakup fees are normally 1-3% of the deal's value.


A company might pay a breakup fee if it decides not to sell to the original purchaser and instead sells to a competing bidder with a more attractive offer. Sometimes a breakup fee can discourage other companies from bidding on the company because they would have to bid a price that covers the breakup fee.

  1. Takeover

    A corporate action where an acquiring company makes a bid for ...
  2. Drop Dead Fee

    Fee paid by a borrower to a lender when an acquisition deal falls ...
  3. Voluntary Termination

    1. An employee's decision to leave a job of his or her own accord. 2. ...
  4. Go Shop Period

    A provision that allows a public company that is being sold to ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. Hostile Takeover

    The acquisition of one company (called the target company) by ...
Related Articles
  1. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  2. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  3. Bonds & Fixed Income

    Trademarks Of A Takeover Target

    These tips can lead you to little companies with big prospects.
  4. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  5. Markets

    10 Most Famous Leveraged Buyouts

    Learn about the boldest, riskiest leveraged buyouts in history and how they either become famous for failing miserably or making billions.
  6. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  7. Stock Analysis

    Is There Any Upside Left for Walgreens?

    Walgreens is about to get much bigger, but does bigger equal better in this case?
  8. Stock Analysis

    Top 10 Companies Owned by Amazon

    Learn about what has made Amazon so successful over the years. Learn about 10 of the most important companies that Amazon has acquired.
  9. Fundamental Analysis

    ABInBev and SABMiller Merger: The Facts

    Beer is a big business. In the United States, beer sales generated more that $101 billion in revenue.
  10. Investing News

    Does the Dell/EMC Deal Make Financial Sense?

    Last week, Dell announced it would be buying IT provider EMC in a $67 billion deal, making it the largest technology deal ever.
  1. What are the different ways I can file my income tax return?

    In contractual law, a letter of intent is a document that represents an agreement between parties before the final agreement ... Read Full Answer >>
  2. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  3. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>
  4. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  5. Are companies with high Book Value Of Equity Per Share (BVPS) takeover targets?

    Companies with high book value of equity per share (BVPS) can be good takeover targets if those companies are public and ... Read Full Answer >>
  6. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center